Netflix Half-Year Report 2022

Revenue in Q2 grew 9% year over year (or 13% excluding a -$339 million foreign currency impact), driven by a 6% and 2% increase in average paid memberships and ARM , respectively. Excluding the impact of foreign exchange (F/X), ARM rose 7% year over year. The appreciation of the US dollar (USD) vs. most other currencies since our April earnings report was the primary reason for the variance to our revenue guidance forecast. We slightly under-forecasted global paid net adds in Q2 (-1.0m vs. -2.0m forecast and compared to +1.5m in the year ago quarter).

• In APAC, revenue grew 23% year over year, excluding F/X. At over $900 million of revenue, APAC
  is approaching the size of our LATAM business. We added 1.1m paid memberships in the region
  (vs. 1.0m last Q2). ARM in APAC was -2% year over year on a F/X neutral basis, due to the impact
  from our price decrease in India last December as well as plan mix, which was partially offset by higher ARM in Korea and Australia. Excluding India, APAC ARM grew 4% year over year on a
  constant currency basis.
• Excluding F/X, EMEA revenue and ARM increased 13% and 6% year over year, respectively, while paid net additions totaled -0.8m vs. 0.2m in the year ago quarter.
• Revenue in LATAM grew 19% year over year excluding F/X and surpassed the $1 billion quarterly
  mark for the first time, helped by constant currency ARM growth of 15%. Paid memberships were flat sequentially (compared to 0.8m paid net adds in Q2’21).
• In UCAN, ARM and revenue each increased 10% year over year, excluding the impact of F/X. Paid
  net adds were -1.3m vs. -0.4m in the year ago period. Retention improved over the course of the
  quarter and, while churn remains slightly elevated, it is now back near pre-price change levels.

We’ve adjusted our cost structure for our current rate of revenue growth. This resulted in approximately
$70 million of severance costs and an $80m non-cash impairment of certain real estate leases primarily
related to rightsizing our office footprint. Excluding these items totaling $150 million, and the F/X impact of the stronger US dollar since our April report, operating profit and operating margin were slightly ahead of our guidance forecast.

EPS of $3.20 vs. $2.97 a year ago exceeded our guidance forecast of $3.00 due to a $305 million non-cash unrealized gain from F/X remeasurement on our Euro denominated debt, which is recognized below operating income in “interest and other income.” Our approximately $5 billion of Euro bonds provides us with some natural hedge against the Euro for net income, but doesn’t affect operating income. Year to date, our gain from F/X remeasurement on our Euro debt is $467 million.